Silver Price Forecast: Gains Capped Ahead of Nonfarm Payrolls Report

Highlights

• Silver prices poised for weekly decline on anticipation of Fed’s interest rate decision.
• U.S. private payrolls in June exceed expectations, reflecting a strong labor market.
• Investors eagerly await nonfarm payrolls report to gauge silver’s short-term forecast.

Overview

Comex Silver prices were poised for a weekly decline as investors anticipate the Federal Reserve’s decision to maintain higher interest rates, putting pressure on non-yielding bullion. However, U.S. private payrolls in June surpassed expectations, reflecting a robust labor market despite concerns of a potential recession stemming from increased interest rates. The ADP employment report revealed a significant surge of 497,000 jobs in the private sector, surpassing the Dow Jones consensus estimate of 220,000 and exceeding May’s gain of 267,000 jobs.

While the ADP data is considered less reliable than other employment indicators, it sets the stage for Friday’s official June payrolls report. Economists surveyed by Dow Jones anticipate the addition of 240,000 non-farm payrolls, lower than the 339,000 jobs added in May. However, investors may be revising their expectations for a stronger number, potentially signaling a resumption of the Federal Reserve’s interest rate hikes this month after a pause. The central bank is scheduled to make its interest rate decision on July 26.

Lorie Logan, President of the Federal Reserve Bank of Dallas, supports the case for a rate increase at the June policy meeting, highlighting the need for further rate hikes to temper an economy that remains resilient. Silver is particularly sensitive to rising U.S. interest rates, as they amplify the opportunity cost of holding non-yielding bullion. Currently, investors using CME’s Fedwatch tool assign a 92% probability of a 25-basis-point hike in July, following the pause observed last month.

Adding to the downward pressure on silver, the yield on 10-year Treasury notes reached its highest level since March 2 after Thursday’s labor market data release. As a result, silver investors eagerly await Friday’s U.S. nonfarm payrolls report to gain further clarity on the trajectory of the Fed’s rate hikes. Additionally, they closely monitor U.S. Treasury Secretary Janet Yellen’s visit to Beijing amid renewed tensions. The outcome of these developments will likely shape the short-term forecast for silver, which could exhibit either bullish or bearish trends.

Technical Analysis

Comex Silver market sentiment remains bearish as the current 4-hour price of 22.885 is slightly lower than the previous 4-hour close. The market price is below both the 200-4H and 50-4H moving averages, indicating a downward trend. The 14-4H RSI sits at a relatively neutral-to-bearish level of 41.25, suggesting some selling pressure.

With the current price closer to the support area of 22.185, breaking through the resistance levels between 24.225 and 24.475 may prove challenging. Overall, the market outlook for Comex Silver leans bearish, and traders should exercise caution as they monitor price action for further confirmation.